Question
I have taken out a new isa each of the last 3 years. What I find is, in the first year the interest is very attractive then after the year is up the interest rate drops, hence me starting a new one each year. So the 3 isas I now have attract very little interest, what would you suggest I do?Answer
This is an annoying common practice amongst banks and building societies. They offer a competitive rate at the outset, often including a temporary bonus, which subsequently declines to a paltry rate a year or two later.
The reason banks and building societies can afford to pay very tempting rates on new accounts is that they're paying pretty awful rates to the majority of their existing customers. And they hope that attracting new customers will give them an opportunity to 'cross-sell' other products and services.
Fortunately it's pretty easy to play them at their own game by moving to a better rate elsewhere once they become uncompetitive.
In your case you can transfer your cash ISAs to a new provider(s). All you need to do is choose a competitive account and ask that provider for a cash ISA transfer form, complete this and they'll handle the rest. The process might take a few weeks (banks and building societies tend to drag their heels) but it's very easy.
And when the new account(s) becomes uncompetitive just repeat the process again. The only thing to check is that your existing ISA provider doesn't charge a penalty for transferring away - rare for variable rate accounts but worth checking nevertheless.
I have taken out a new isa each of the last 3 years. What I find is, in the first year the interest is very attractive then after the year is up the interest rate drops, hence me starting a new one each year. So the 3 isas I now have attract very little interest, what would you suggest I do?Answer
This is an annoying common practice amongst banks and building societies. They offer a competitive rate at the outset, often including a temporary bonus, which subsequently declines to a paltry rate a year or two later.
The reason banks and building societies can afford to pay very tempting rates on new accounts is that they're paying pretty awful rates to the majority of their existing customers. And they hope that attracting new customers will give them an opportunity to 'cross-sell' other products and services.
Fortunately it's pretty easy to play them at their own game by moving to a better rate elsewhere once they become uncompetitive.
In your case you can transfer your cash ISAs to a new provider(s). All you need to do is choose a competitive account and ask that provider for a cash ISA transfer form, complete this and they'll handle the rest. The process might take a few weeks (banks and building societies tend to drag their heels) but it's very easy.
And when the new account(s) becomes uncompetitive just repeat the process again. The only thing to check is that your existing ISA provider doesn't charge a penalty for transferring away - rare for variable rate accounts but worth checking nevertheless.
Read this Q and A at http://www.candidmoney.com/questions/question455.aspx
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